Cyprus Bailout | Concept of South’s Solidarity Fund Agreed

Cyprus Bailout | Concept of South’s Solidarity Fund Agreed

The idea of an Investment Solidarity Fund (ISF) to raise some of the €5.8bn needed to bail out the south has been agreed by MPs there. The idea is currently “undergoing legal and technical processing by the Law Office of the Republic,” according to government spokesman Christos Stylianides. The result of this processing will then be presented to the Council of Ministers at 6pm.

This sounds like the equivalent of the issuing of war bonds in exchange for cash. These bonds could possibly be a long term loan at a low or zero interest rate. On the open market, which the south cannot use, the unlikelihood of repayment in full or in time would class them as ‘junk bonds.’ This is not to say that this isn’t a good idea, but would require every living in person in the south to invest €5000, have it locked up for years and then maybe only get part of it back. The original haircut could look a lot better if this is how the ISF was to work.

Archbishop Chrysostomos II says he is going to mortgage church land and invest this money in the fund, without actually saying which bank would give him the cash. There is a rumour that Hellenic Bank, of which the church is a major shareholder, could be approached. There is also a rumour that in 2004 when he was Bishop of Paphos he said that if his parishioners voted against the Annan Plan he would compensate them for any land they had left in the north. He later denied he made the offer.

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